Blog

Expert views: Ukraine, Russia and Europe's energy security

05 Mar 2014, 09:30

Ros Donald

Have we been here before? Russia is flexing its muscles in
Ukraine, its large and strategically important neighbour, sparking
wide-ranging concerns within Europe from Russian expansionism to
energy security. We ask experts what history can tell us about
Russia's position in global energy politics.

Energy has been a key element in Russia's relationships with
Europe and its former Soviet neighbours like Ukraine, interwoven
into cooperation - and tensions - for decades. Russia has
cut off gas supplies to the Ukraine and neighbouring countries
twice in recent years, once in 2006 and again in 2008 as a
result of price disputes.

And this winter's protests, that led to the eventual ousting of
Viktor Yanukovich, Ukraine's Russia-friendly president, were
sparked by an agreement with Russia that reduced Ukraine's
dealings with Europe in return for - among other things - a 30 per
cent reduction in the price the country pays Russia's gas company,
Gazprom.

Gas and oil prices have already risen amid
fears that the Ukraine crisis could harm energy supplies. Europe
still gets around 30 per cent of its gas from Russia - about
80 per cent of which reaches the bloc via the pipelines that go
through Ukraine.

Commentators such as the Financial Times's Nick Butler suggest Russia's actions
expose its vulnerability: its dependence on oil and gas revenue,
which has grown over president Vladimir Putin's
tenure. Michael Klare, professor of peace and world security
studies at Hampshire College, says the incursion is more
complicated, however:

"A lot of elites in Ukraine and
Russia benefited from the cozy ties between Gazprom and Ukrainian
gas companies and are reluctant to see an EU-imposed order that
would threaten their wealth and privileges."

He says the crisis will lead to strengthened calls to move
Europe away from dependence on Russian gas to other
suppliers.

The crisis already has Europeans revisiting their best options
for maintaining a secure supply of energy. Some commentators are
praising
renewables' ability to keep the lights on even while fossil
fuel supplies look uncertain. Others make the case for exploiting
domestic fossil fuel sources like
shale gas.

But countries should also look at how they can collectively
improve their resilience to price shocks if Russian gas supply is
set to continue to be volatile, says Dr. Harald Heubaum, Lecturer
in Global Energy and Climate Policy at the School of Oriental and
African Studies.

"In 2009, as a result of the last major
supply crisis involving Russia and the Ukraine, the EU began to
develop a new energy security strategy. Individual member states
are still dependent on Russian gas, some of them heavily. But 2014
could go down as the year in which the EU finally got serious in
its attempts to diversify away from Russian gas. This would mean
heavy investment in domestic renewables, shale gas and expanding
relations with other suppliers through the Southern Corridor or
even with the US, which is considering exporting some of its shale
gas."

Heubaum adds:

"The US's shale gas boom is a huge
threat to Putin. We tend to forget that Europe isn't just dependent
on Russian gas - Russia is heavily dependent on the consumers of
its gas and oil. There are similarities to the situation at the end
of the Soviet Union when a drop in oil prices in the 1980s led to a
significant loss in Soviet revenue.

"If Europe pursued a stronger common
energy policy, further reducing dependence on Russian gas, it would
eventually be able to display a more muscular attitude toward
Russia. But at the moment, it doesn't seem to realise it holds most
of the cards. The 2006 and 2009 crises haven't resulted in a
significant pushback, and countries like Germany and Italy have
continued to break rank, negotiating bilateral deals with Russia.
2014 could be a big chance for Europe - but only if it realises
it."

To understand the Ukraine crisis, it's also important to unpack
Russia's internal dynamic. Dr Caroline Kuzemko, a research fellow
at Exeter University tells Carbon Brief:

"We forget in the West how differently
Russians understand these events. Russians do not want Europe to
dictate their energy policy. For 10 economically devastating years
after the fall of the Soviet Union, Europe told Russia how to
conduct its energy policy. Many still blame Europe and see it as an
aggressor in situations like the Ukraine crisis. The battle of
ideas between Russia and the West has been going on for
centuries."

In addition to understanding Russia's motivations, Europeans
must also look at how viable Russia is as a future energy trading
partner, Kuzemko says.

"What is more important than the current
Russia-Ukraine story is what Russia is doing with its asset base.
Russian oil and gas companies, like many IOCs, have produced
at a high rate from many of their assets - thereby running these
assets down more quickly than, for example, the Norwegian or Saudi
Arabia policy of resource management which balances returns now
with future security. The UK, like Russia, produced very
quickly from North Sea assets hence they too have run down very
quickly. Thinking about things like that will be important if
Europe wants to rely on Russia in future for energy supplies."

What's more, Russia is starting to rethink its relationship with
Europe altogether:

"Russian companies need to make
long-term decisions about where their markets are going to be. They
need security of demand just as much as, say, Europe needs security
of supply - so the obvious move for them is to produce more
infrastructure (as they are doing) that allows them to export
eastwards rather than towards the West."

Doing so would reduce Russia's dependence on distribution
through Ukraine - as well as on European trade.

The Ukraine crisis serves as a focal point for European concern
over dependence on Russia for energy. It's tempting, however, to
assume that Europe will continue to import Russian gas well into
the next century as demand for gas increases.
Research suggests even a shale gas boom will not halt Europe's
appetite for Russian gas. Despite efforts on both sides to reduce
their dependence on each other, energy interdependence with Russia
may be a difficult goal for Europe to achieve.